Government Operations Committee on Sept. 20th, 2016

[The Chair, Conservative, Tom Lukiwski]

Thank you so much.

We'll go now to five-minute rounds.

Go ahead, Mr. McCauley, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Ms. Hoeg, I don't know if you want to take the opportunity to answer Mr. Blaney's question briefly.

[Krystyna Hoeg]

I believe the question was basically on long-term financial self-sustainability. Certainly we have put forth a number of options for consideration. They have a sensible amount of cost-cutting and financial benefit to them and they should be considered.

Over the long haul, the real problem is that Canada Post has a dual mandate. It has its social policy, its universal obligation mandate, and it has its corporate mandate right now within the parcel area. Within that space, as we look at digitalization and what is going to happen, while the monopoly side goes down and the competitive side goes up through parcels, Canada Post will be competing in the real world.

Based on the projections we looked at, under a reasonable status quo perspective the revenues simply will not outpace the costs. Ultimately you end up with a financially unsustainable position. This is why we concluded that by 2026-ish we would be looking at sizable losses.

[Kelly McCauley, Conservative, Edmonton West, AB]

Excellent. That was well explained.

I think you answered this question when responding to Ms. Shanahan, but did I understand correctly that there was no appetite shown for higher taxes to support the current model? Is that correct, or was it just that there wasn't an appetite for higher stamp prices, or did the same kind of feedback come for both?

[Françoise Bertrand]

The increase in the price of stamps is not acceptable. A little indexation is not noticeable, but when you go from 63 to 85 cents, that is really where the problem lies. If you forget about that and you talk about a subsidy, it's important for people to understand that means their taxes. People didn't want that either.

[Kelly McCauley, Conservative, Edmonton West, AB]

Perfect.

I have a last quick question. You talked a lot about community mailboxes, and it almost looks practical that we're going to go down that path again. What do we have to do to engage municipalities and get them back on board? We've seen everything from crazy mayors destroying...

[Françoise Bertrand]

Frankly, the more it is planned with the communities involved, the better the situation will be. What we have observed and been told is that there was, for the most part, no real consultation—

[Kelly McCauley, Conservative, Edmonton West, AB]

If we do proper consultation and planning, do you get a sense that the municipalities will come on board?

[Françoise Bertrand]

Well, some will not when it touches the downtown—Toronto, Montreal, Vancouver don't want it downtown. It is not because they're against it; it's just not practical. They don't have the space.

[Kelly McCauley, Conservative, Edmonton West, AB]

Yes.

[Françoise Bertrand]

In the suburbs, it can be easily planned if there is consultation.

[Kelly McCauley, Conservative, Edmonton West, AB]

Luckily, downtown is mostly apartment buildings where—

[Françoise Bertrand]

Yes, so that's why we removed 800,000 doors that were touched by that option from our calculation.

[Kelly McCauley, Conservative, Edmonton West, AB]

Right.

Do I have any time? No.

[The Chair, Conservative, Tom Lukiwski]

Madam Ratansi, I believe you and Monsieur Drouin are sharing a five-minute intervention.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Yes, we are. Thank you.

I'd like to follow up on what Mr. Whalen asked. He asked you about the labour cost of operations. It says in the revenue area that the cost of operations is $6.2 billion. That, you say, does not include executive salaries. If it doesn't, from an accounting perspective, how do you then come up with a profit or loss before tax? I need to understand this.

[Krystyna Hoeg]

Yes, it is included in the costs.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

It is.

[Krystyna Hoeg]

It is.

If I could elaborate, EY did a review of the management costs that we were privileged to look at. Over the course of time, as the head count has gone down for the unionized staff, so have management numbers as well. They also, management, applied direct contribution to new hires, as opposed to a benefit pension plan. The benchmark will show that their costs were in line directionally with similar corporations.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

That's not my question here. We're talking about the sustainability of Canada Post, which is a national symbol. I think we need to have a frank discussion about losing a labour force through attrition or whatever, or through change or streamlining of the process. What is this $2.3 billion in unallocated costs? Is it the cost of management salaries and contractual obligations?

[Krystyna Hoeg]

It basically is the network costs that are common across all the lines of business that are not allocated. A small portion of that will be management costs.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

You don't know what percentage of it?

[Krystyna Hoeg]

We did have a look at it. I can't tell you at the top of my head.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Okay, because if I do the calculations as an accountant and say 70% of $6.2 billion and then deduct the 64,000 or 61,000 people and then start looking at it, and then I look at labour costs and that comes to $3.5 billion, then the rest is left as a guesstimate. To get rid of the guesstimate and to ensure that we are logically looking at savings, we need to be balanced. That's my major concern.

[Françoise Bertrand]

Madam Vice-Chair, please allow me. Out of $4.4 billion labour costs, $650 million is management, overhead, and back office.